Foreclosure Laws In NJ: Residential vs Non-Residential Mortgages

The purpose for your mortgage can determine whether it can still be enforced years after its due date.  Foreclosure laws in NJ treat residential mortgages and non-residential mortgages differently. A residential mortgage can become unenforceable if the lender does not move to foreclose within six years of the maturity date of the mortgage.  To render a commercial mortgage unenforceable there must be more than twenty years of non-payment and inaction by the lender.The Fair Foreclosure Act was enacted in 1995 to protect residential mortgage debtors. N.J.S.A. 2A:50-53 et seq.    In 2009, the New Jersey Legislature amended the Fair Foreclosure Act to provide clarity and address problems caused by residential mortgages which have been paid or which are otherwise unenforceable.  See Statement to Senate Number 250, NJ Assembly Financial institutions and Insurance Committee October 6, 2008.  Such unenforceable mortgages “cloud the title” for a property, casting doubt on the title as a result of the encumbrance. This cloud can reduce the value and marketability of the property because any prospective buyer will perceive that they are buying property for which good title may not be conveyed.

The 2009 amendment to the Fair Foreclosure Act sought, in part, to codify an earlier New Jersey Appellate Division holding in Security National Partners v. Mahler, 336 N.J. Super. 101, 104(App. Div. 2000), that a 20 year limitations period limits a mortgagee’s (i.e., mortgage lender) right to commence a foreclosure action, running from the date of the debtor’s default.  Prior to the enactment of this amendment, New Jersey did not have a statute of limitations addressing mortgage foreclosure actions, and courts applied a 20 year limitations period based on the common law adverse possession period.  Anim Investment v. Shaloub, F-30508-15, (N.J. Super. Ch. Div. June 30, 2016) (Slip Op. at *4).  However the 2009 amendment only addressed residential mortgages.
The statute provides:  
“An action to foreclose a residential mortgage shall not be commenced following the earliest of:

a. Six years from the date fixed for the making of the last payment or the maturity date set forth in the mortgage or the note, bond, or other obligation secured by the mortgage;
b. Thirty-six years from the date of recording of the mortgage, or, if the mortgage is not recorded, 36 years from the date of execution, so long as the mortgage itself does not provide for a period of repayment in excess of 30 years; or

c. Twenty years from the date on which the debtor defaulted, which default has not been cured, as to any of the obligations or covenants contained in the mortgage or in the note, bond, or other obligation secured by the mortgage.”
N.J.S.A. 2A:50-56.1 (Emphasis added).

Therefore under this statute, for residential mortgages “there are three triggering events which commence the running of the statute of limitations period, after which a mortgage foreclosure action cannot be brought.” First is the maturity date for the mortgage.  Second is the date of recording of the mortgage. And third is the date that the debtor defaulted.  Each of those triggering events has a different applicable term for its statute of limitations to run.  The statute commands that the “earliest” date for expiration of a statute of limitations be applied.  

In a recent unpublished Chancery Division case, Judge Edward A. Jerejian (Bergen County) found that a residential mortgage with a maturity date of October 1, 1995 became unenforceable six years later on October 1, 2001. Anim, supra, slip op.  at *9.​​  1   The court found that the statute required the use of the earliest applicable statute of limitations date under N.J.S.A. 2A:50-56.1.  In addition, a 2011 unpublished Appellate Division case found that the statute of limitations elapsed in 2000 on a mortgage with a maturity date in 1994 because the six year statute of limitation under N.J.S.A. 2A:50-56.1(a) was applicable.  Garruto v. Cannici, 2011 N.J. Super. Unpub. LEXIS 1436, 2011 WL 2409912 at *1 (App. Div. June 6, 2011).

​The first question to ask when determining if a long unenforced mortgage is enforceable is whether at issue is a residential mortgage.  If yes, the mortgage is subject to the Fair Foreclosure Act.  The Fair Foreclosure Act (as well as its 2009 statute of limitations amendment) only applies to “residential mortgages”.  See  N.J.S.A. 2A:50-62.  “Residential mortgage” is defined as:

“mortgage, security interest or the like, in which the security is a residential property such as a house, real property or condominium, which is occupied, or is to be occupied, by the debtor, who is a natural person, or a member of the debtor’s immediate family, as that person’s residence. This act shall apply to all residential mortgages wherever made, which have as their security such a residence in the State of New Jersey, provided that the real property which is the subject of the mortgage shall not have more than four dwelling units, one of which shall be, or is planned to be, occupied by the debtor or a member of the debtor’s immediate family as the debtor’s or member’s residence at the time the loan is originated.”  ​N.J.S.A. 2A:5-55 (emphasis added).  

Therefore, two fundamental conditions must be met to have a residential mortgage: The mortgaged premises consists of not more than four dwelling units; and “the requisite occupation or intention to occupy exists by the debtor (or the debtor’s immediate family member) at the time the loan is originated.” 30 New Jersey Practice, Law of Mortgages, §24.9 at 254(Myron C. Weinstein)(2nd Ed. 2000).

If a mortgage does not qualify as “residential,” there are still judicially created limitations on foreclosing.  New Jersey courts have enforced a “twenty year limitation period to foreclose a mortgage” by “borrowing and applying the twenty year limitation period in certain adverse possession statutes.”  Security National Partners, 336 N.J.Super. at 106.   The Appellate Division in Security National clarified this issue by stating “a twenty year period of non-payment on a mortgage constitutes a running of the statute of limitations” Ibid.  In Security National, there is no distinction between residential mortgages and non-residential mortgages and thus the holding is applicable to all mortgages.  A later statute modified this judicially created limitation on foreclosing residential mortgages, but the twenty year limitation period adopted in Security National has not been modified and appears to still be applicable to non-residential mortgages.

Key Takeaways:

  • The statutes of limitations for enforcing residential and non-residential mortgages are different.
  • Residential mortgages may become unenforceable six years after their final maturity date.
  • Both residential and non-residential mortgages become unenforceable after 20 years of consistent non-payment, when the lender does not attempt to foreclose within that 20 years.

 1 Unpublished court opinions, such as this one, are not precedent and not binding on any court.  R. 1:36-3. However, an unpublished opinion may be persuasive secondary authority.  Ibid. In other words, unpublished opinions are instructive but not mandatory. 

Appellate Court Clarifies Affordable Housing Obligation

An appellate court recently clarified the affordable housing obligation of New Jersey municipalities. In Re Declaratory Judgment Actions Filed by Various Municipalities, County of Ocean, Pursuant to The Supreme Court’s Decision in In Re Adoption of N.J.A.C., 221 N.J. 1 (2015), N.J. Super. App. Div. (Fasciale, J.A.D.) addressed whether a municipality was obligated as a “separate and discrete” component of its fair share obligation to calculate its fair share of affordable housing between 1999 and 2015 (the “gap period”).  The Court held that a municipality did not have to make a separate calculation of its obligation during the gap period.  The Court ruled a municipality was not required, by the Fair Housing Act of 1985 (“PHA”), to retroactively make that calculation.  Instead, the Court concluded, the fair share obligation during the gap period should be included in a municipalities’ current obligation to provide affordable housing.  The Court reasoned that any change in the methodology used to calculate the fair share housing obligations of municipalities during the gap period should be left for consideration by the Governor and the Legislature.
William Wolf, a partner in Bathgate, Wegener & Wolf, P.C. has significant experience dealing with land use and planning issues.  Mr. Wolf currently serves as special litigation counsel for several municipalities.  Mr. Wolf has represented numerous developers and property owners.

Mr. Wolf is a Senior Fellow of the Litigation Counsel of America, he has been designated as a Super Lawyer and AV Preeminent® for many years and he was selected to be listed in the Best Attorneys of America.  Mr. Wolf has been certified, by the American Institute of Appellate Practice, as an appellate specialist.

Voluntary Mediation: The Key to Successful Dispute Resolution

You should be aware that voluntary mediation is the most successful form of Alternative Dispute Resolution. To say that the process produces results is a major understatement. I have been involved exclusively in this area of Dispute Resolution for the past 5 ½ years. I enjoy settling cases and revel in a success rate of 95 percent.

Most often the case settles on mediation day; however, the key to my success is that I, at no time, give up on the process. In the event the case does not settle after the first attempt at mediation, I obtain the attorneys’ cell phone numbers and as I generate settlement ideas during the progression of the case, I communicate them to the attorneys and eventually everyone sees the wisdom of settlement.In over 18 years on the bench as a Superior Court Judge, I oversaw hundreds of cases.  This experience armed me with the knowledge and experience to quickly and thoroughly evaluate the strengths, weaknesses and settlement values of each case I mediate.  My judicial experience imparted in me the importance of impartiality and cold evaluation of the dispute, which I apply to each mediation.

Many mediators fail in their attempts to “successfully mediate” because they do not have the tenacity to pursue the process to a satisfactory conclusion. In addition to tenacity, a mediator has to be creative and not afraid to express opinions about the strengths, weaknesses and settlement values of each case. The mediator must also have the capacity to show the parties that he understands their case and more importantly, their circumstances. When a party is confident that the mediator is knowledgeable and sincere, he will determine that it is in his best interests to settle at the mediator’s recommended number. While parties can and do seek unique remedies in court, most of the time the parties seek money damages to compensate them. What that means is that most cases cannot settle without a dollar amount and that is where a knowledgeable mediator comes in. A mediation that does not produce a settlement number is destined to fail.

Another key to a successful mediation is the understanding that there are two sides to every story. Lawyers are advocates for their clients, so they often become so entrenched in their own position that they cannot appreciate the other party’s view. So an impartial activist mediator is needed to bring the parties together. I often say a “good settlement” is one where both sides are “unhappy” and a “great settlement” is one where both sides are “extremely unhappy”.

Voluntary mediation requires that the parties pay the mediator. The payment, however, will be less onerous than the time, money and uncertainty in continuing litigation. Done correctly, mediation is positive and best of all if someone does not like how the mediation is progressing, he or she may just leave the table without any repercussions or explanation.

​Voluntary mediation is perfect for both plaintiffs and defendants because it gives the parties a chance to avoid excessive risk, time and litigation expense. If you are not currently mediating, I highly recommend it to you and after your first experience you will become a convert.


  • Voluntary mediation is the most successful form of Alternative Dispute Resolution
  • Never give up on the process – most often the case settles on mediation day
  • Generate settlement ideas and share them with judge and attorneys
  • A mediator has to be creative and not afraid to express opinions about the strengths, weaknesses and settlement values of each case
  • An impartial activist mediator is needed to bring the parties together
  • Voluntary mediation is perfect for both plaintiffs and defendants because it gives the parties a chance to avoid excessive risk, time and litigation expense.​

If you would like to discuss any aspect of the mediation process, call Judge O’Brien at (732) 363-0666.

Photo by Afif Kusuma on Unsplash

Patent Infringement And The Push And Pull of Patent Litigation

Patents support an estimated five trillion dollars ($5,000,000,000,000.00) of the US economy and close to forty million jobs. It is, therefore, understandable for Congress to nurture and cultivate this industry.  Similarly mindful of the importance of this industry, the United States Supreme Court decides cases that clarify rules and regulations to provide guidance in this vital area. 

Recent patent legislation and litigation have resulted in changes in the law that appear haphazard and somewhat conflicting.  The professed overall goal of congressional statutory revisions is to maintain the competitive advantage of the United States in the global economy with a “system that will support and reward all innovators with high quality patents.”1  However, Congress actually enhanced the weapons used to destroy issued patents.  The Supreme Court decides each case on the facts at hand, but recent cases have uniformly increased the potential damages that can be assessed against an infringer.  At the same time, the Court has severely limited the inventions that can be protected by a patent.While the actions above appear inconsistent, taken together these changes will enhance the U.S.’s flourishing intellectual property industry.  While not every patent will survive these changes, those that do will be much more valuable.

Congressional Change
In 2012 Congress passed the most significant change to patent law in more than half a century, the America Invents Act (“AIA”).  The headline change in the AIA brought America in line with the rest of the world by awarding patents to the “first inventor to file” instead of the “first to invent”.  More important for patent litigators, AIA revised and expanded post patent grant challenge procedures.

For patent litigators, the AIA strengthened and streamlined the post patent grant challenge procedure known as the Inter Partes Review (“IPR”). The IPR allows any party to challenge an issued patent alleging that the Patent Office should not have allowed the patent because it is not novel (i.e. invalid).  A typical IPR is filed when someone is accused of infringing a patent.  The accused infringer defensively files an IPR to challenge the validity of the patent it is accused of infringing.  After the accused infringer files its IPR allegation, it is common for the district court patent infringement action to be stayed pending the outcome of the IPR.  If the IPR finds that the patent is not novel (i.e. the patent is invalid), the law suit becomes moot and is dismissed because one cannot infringe an invalid patent.  If the patent is not invalidated at the IPR, the patent proceeds through traditional patent litigation.  In that action, the patent owner receives the benefit of the IPR determination that forbids the accused infringer from raising any invalidity defense that was raised or reasonably could have been raised at the IPR.

Used effectively, the IPR can prevent years of costly patent litigation by cutting straight to one of the three most important issues in a patent litigation; that is, whether the patent is valid.2  The AIA limits the length of an IPR to no more than eighteen months, which is a comparatively short amount of time in the often years long slog of patent litigation.  Furthermore, as long as the underlying infringement trial is stayed, no time or money is expended in discovery and motion practice.

Finally assuming a patent is upheld in the IPR, having a decision in hand on the validity of the patent removes uncertainty as to one of the three central fights in typical patent litigation. (1)Validity, 2)infringement, 3)damages).  Each side can better assess and value settlement when a third of the variability/uncertainty surrounding the litigation has already been decided.

Supreme Court Opinions
Recent U.S. Supreme Court rulings increase the likelihood of extraordinary damages being assessed for patent infringement.  In Octane Fitness v. ICON Health & Fitness, 572 US _ (2014), the Supreme Court broadened the circumstances in which attorney fees could be assessed against a losing party in a patent infringement suit.  Because patent litigation can be quite expensive, any easing of proof needed to shift attorney fees to the loser can have a huge effect. Similarly, the Court in Halo Electronics, Inc. v. Pulse Electronics, Inc., 579 U.S. ___ (2016) lessened the patent owner’s burdens to receive “enhanced damages” such as treble damages (actual damages multiplied by 3).  These two decisions increase the chances of a patent infringement litigation resulting in significantly large damage awards.

The Supreme Court has also severely narrowed the possible inventions that can be patented.  In 2010, the Court narrowed the subject that could be patented in Bilski v. Kappos, 561 U.S. 593 (2010).  The Court later reinforced this patentable subject matter narrowing in Alice Corp. v. CLS Bank International, 573 U.S. __ (2014), finding abstract ideas are still unpatentable even if implemented using computers. In effect, Alice severely limited the patentability of so-called “software patents”.

Taken in isolation, the changes implemented by Congress and the Supreme Court seem contradictory and at cross-purposes:  increasing the power of a patent owner by augmenting damages while enhancing power of accused infringer through expanding patent validity defenses.

However, the overall goal of the U.S. patent system is to encourage innovation.  Congress  simplified the process and shortened the time to determine whether a patent is valid through the IPR.  A patent that survives such an IPR challenge will be regarded as stronger and more valuable to the patent owner.  Patents that do not survive IPR challenge are worthless.  Similarly, by narrowing the subject matter that can be patented the Supreme Court has provided greater clarity and eliminated some uncertainty regarding the viability of patentable inventions.  Removing uncertainty as to the validity of a patent can only enhance its worth.  Finally, facilitating the award of attorney fees and other enhanced damages for patent infringement increases the value of the patent at verdict and in negotiating a settlement.  While not every patent will survive the gauntlet of obstacles put forward by Congress and the Supreme Court, the patents that do survive will be much more valuable to their owner.  By rewarding the inventor in this fashion, the U.S. strives towards its goal of encouraging innovation.

1. H.R. Rep. No. 112-98, pt.1, at 40 (2011)
2. The other two important issues in patent litigations are: 1) does the accused product infringe the patent; 2) if so, what are damages.  However if patent is invalid, there can be no infringement and no damages.

Photo by Mari Helin on Unsplash